Best finance option??

This is a good idea, but it doesn't necessarily mean your property is safe if you are sued. Have you contributed to the repayment of the loan on this property or made other non financial contributions?

Does you wife have a valid will set up with a testamentary discretionary trust in place?

It could be claimed that your wife owns your share of the house, ie 50%, as trustee for you. A court could deem, or construe, that a trust is in place even though you may not have a formal arrangement or agreement in place. This would be a constructive trust. Probably won't happen unless you are looking at big claims and there is big equity. There is a case in which a barrister went bankrupt and the ATO got half his house – FCT v Cummins.

People generally don't lke to consider death, but all you asset protection methods could be thrown out the window if your wife would leave you the property in her will. Imagine your business fails because the wife has an illness and you are looking after her. You are sued and a judgment is entered against you, You are then bankrupted, but soon inherit the house.

Testamentary trusts also has some amazing tax benefits for kids under 18.

You could leave an asset to a SMSF as it is just a trust – but there would probably be some adverse taxation consequences. I hadnt considered this before.

Morts, not sure where the fraud and negligence came into it.

With a negligence case you would, if lost, have a judgment awarded against you. This is what we are protecting against – bankruptcy. If you don't pay a judgment debt there are a few things that can happen and all of them involve the seizure of your property. If you don't have enough propety then you would generally be bankrupted. This is where the trustee in bankruptcy can look at past transactions and commence legal action against wife etc who owe you money or hold assets on trust for you.

Fraud is a criminal act so you could face gaol as well as civil actions to return the money etc. There is also the proceeds of crime legislation which enables police to seize property which was purchased with money made from crimes. So same as above but worse.

I think it would not be possible to will an asset to a SMSF for a few reasons. SMSFs are there to provide for the retirement of the members – this is the sole reason. So if the member dies who are you providing retirement benefits for – death is teh ultimate retirement. You would be crediting the account of a surviving member – and this would be a contribution. So you would have to meet all the contribution cap rules etc. A residential house would also be against the rules too, but you would be a related party.

The testamentary trust would work well and may even assist if you were to later remarry and then divorice. But only slightly. If would assist your children more if they were to later marry and divorce (because the assets of the trust would not have been built up by their efforts).

There is also extra ta benefits- children can receive income from a TT at dult rates meaning approx $16,000 per year each. This becomes $20,542 from next year. That is huge. Imagine if you rented the house out in the future and had 2 kids – your family could receive $40,000 pa in rental income tax free.

Morts

PI insurance wouldn't help if you had debts you couldn't pay.